How Cutco Managed the Job Security of its Workers

One of the major concerns for workers in manufacturing is job security. Manufacturers traditionally view workers as a variable expense, laying them off when business slows down.  Also, through outsourcing production and automating tasks, jobs are eliminated, posing an additional threat to job security. In response to these threats, Cutco management developed a strategy to minimize layoffs. They initiated a voluntary overtime policy for workers and hired students during peak production summer months, thus eliminating the need to lay off full time workers when production slowed down.  They also made the decision to “insource” the manufacturing of some products into their own facilities rather than outsource it. When production slowed down, they cut back on the voluntary overtime and, rather than hire temporary seasonal help for their distribution center, transferred workers within manufacturing to the distribution center, thereby eliminating layoffs. 

Only once since the ownership transition in 1982 did the company lay off workers.  In 2003, a major drop in sales required a layoff. To reduce the burden on workers, those laid off were given 6 months’ notice.  In 2014, the company experienced another slowdown. This time, to eliminate layoffs, the company implemented a shared work program with the State of New York, shortening the work week while the state subsidized the time not worked. Benefits were fully paid during this program. 

What does this all mean for workers?  Their belief that management has developed a strategy of minimizing layoffs is huge.  All businesses go through cycles in which the bottom line is affected. Rather than treating workers as a variable expense by laying them off or replacing them by outsourcing or automating their work to reduce labor costs, Cutco’s management decided to treat its workers as a fixed expense, bringing work into their plants and finding ways to avoid layoffs.  In the short run, this can cost the company profits or even create losses. In the long run, however, the loyalty and commitment of workers, the stability of the workforce, the enthusiasm workers exhibit toward their work, and the alignment of management and the workforce, including the union, has fueled the growth and profitability at Cutco. The company’s success can be directly attributed to the strength of the harmony that exists between management and the workforce.  Management’s concern for worker job security is a large part of this harmony.